National Savings and Investment (NS&I) has increased the interest rates on its Guaranteed Growth and Guaranteed Income Bonds from today, the second such boost to savers this year.
It comes weeks after NS&I announced rate increases on a number of its other accounts and boosted the odds for Premium Bonds.
The bonds' interest rates will rise to 5 per cent, up from 4 per cent for the Growth account and 3.9 per cent for the Income bond, and will come into effect immediately for new customers. The rise follows previous increases announced in February 2023, however, savers who bought those bonds after the last increase will have to wait until next year before benefitting from the higher returns.
Existing customers whose bonds have matured can also buy NS&I's two-and three-year bonds, which will pay 5.1 per cent from today, up from 4.2 per cent. However, these are not available to new customers. As of 6 July the best-buy one-year bond paid 6.1 per cent from FirstSave.
Last month, NS&I announced savers with Direct Saver and Income Bonds would see returns boosted from 2.85 per cent to 3.4 per cent from today, with the Premium Bonds prize fund rate increasing to 4 per cent from 3.7 per cent from August. The latter’s odds have also improved from 24,000 to 1 to 22,000 to 1, the best level in 15 years.
However, savers locking money away in the one-to-three-year bonds will be taking a chance that rates will not increase in the near future. Those who already bought a one-year Income bond in February would have been better off waiting to lock in today's higher rate. Savers would also have to consider tax implications at rates this high, with returns likely to fall outside on the personal savings allowance.
NS&I has been following the Bank of England's rate raising campaign and remained competitive, although none of its accounts are best buys. Premium Bonds returns were increased twice in June alone and market expectations are for the BoE to take the bank rate to 6.5 per cent next year, up from 5 per cent today.
